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India country brief

Political overview

System of government

The Republic of India is a constitutional democracy made up of 29 states and seven union and national territories. The Constitution came into force on 26 January 1950 and lists the powers of the Federal Government (known as 'the Centre' or 'Union Government'), those of the states, and those which are shared responsibilities. The President of India is obliged to act on the advice of the Council of Ministers, chosen by the Prime Minister.

Parliament is bicameral, comprising the 545-member Lok Sabha ('people's' or lower house) and the 245-member Rajya Sabha ('states' or upper house). Lok Sabha members are elected by universal adult suffrage every five years (except for two nominated Anglo-Indian members) using the 'first past the post' voting system. The Rajya Sabha is not subject to dissolution; one-third of its members retire every second year.

Recent political developments

The 2014 Indian national election for the Lok Sabha (lower house) saw the Bharatiya Janata Party (BJP) and its National Democratic Alliance (NDA) partners form a new government. The BJP won 282 seats on its own in the 545-member Lok Sabha, the first time that a single party has obtained a parliamentary majority since 1984. Other parties in the NDA won a further 54 seats.

The election was held over 9 polling days at 930,000 polling stations between 7 April and 12 May. Over 553 million citizens voted, 66 per cent of the 834 million eligible voters, making the election the largest democratic event in history.

The electoral campaign of Narendra Modi, the leader of the BJP and new Prime Minister of India, was characterised by a message of economic development and good governance. Prime Minister Modi and his cabinet were sworn in on 26 May.

Elections for the Rajya Sabha (upper-house) are not held concurrently with Lok Sabha elections. One-third of Rajya Sabha members are elected every two years by the legislative assemblies of the Indian states. Rajya Sabha elections for vacant seats are expected in late 2014.

Foreign relations

India's foreign policy has traditionally reflected a broad national consensus on security and foreign relations. Since independence in 1947, India has sought to position itself as a major international player. It has been at the forefront of developing country activism and was a founding member of the Non-Aligned Movement (NAM). India has also been an active member of the United Nations and the Commonwealth and has expanded its cooperation with East Asia, including with Association of South East Asian Nations (ASEAN) countries and as a member of the East Asia Summit (EAS).

In late 1995, India was granted full dialogue partner status with ASEAN and was admitted as a member of the ASEAN Regional Forum in July 1996.

In terms of its international role, India is lobbying for a permanent seat on the United Nations Security Council (a claim which Australia supports)

As its economic power develops, India is seeking to consolidate further its international role and to increase its focus on 'economic diplomacy', particularly to secure energy supplies.  It is taking a more prominent role in fora such as the World Trade Organization and the G20.

India is the major power in South Asia and its relations with its neighbours govern the tenor of foreign relations in the region. India's major strategic focus has traditionally been on its neighbourhood although more recently it has sought to broaden this focus, notably towards East Asia. It is active within regional groupings such as the South Asian Association for Regional Cooperation (SAARC), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), and within the Brazil, Russia, India, China and South Africa (BRICS) group.

'Look East' policy

Like Australia, India is pursuing a combined multilateral, regional and bilateral approach to trade through its 'Look East' policy with Asia. India’s ‘Look East’ policy seeks to establish closer ties and greater integration with East Asian economies. The policy formed part of India’s package of reforms in 1991 and represented a dramatic shift from India’s former economic policy that emphasised self-reliant economic development.

Indian Ocean Rim Association (IORA)

In November 2013 Australia assumed the role of Chair of the Indian Ocean Rim Association from India. The two countries will continue to work closely together to address challenges facing the Indian Ocean region.

The Association, the apex pan-Indian Ocean multilateral forum, focuses on more effective practical cooperation in the six priority areas of maritime safety and security; trade and investment facilitation; fisheries management; disaster risk reduction; tourism and cultural exchanges; and academic and science and technology cooperation.. These priority areas were identified by IORA Member States at the 11th meeting of the Council of Ministers held in Bengaluru, India in 2011.

Outcomes from the 13th Council of Ministers’ meeting in November 2013 included a commitment from members to revitalise IORA, a Declaration on the Indian Ocean and its resources, an agreement to change the name from Indian Ocean Rim Association for Regional Cooperation (IOR-ARC), to Indian Ocean Rim Association (IORA) and proposals for organisational reform.

Relations with the United States

The development of the India-United States relationship in recent years has been driven by increasing recognition, in both India and the United States, of each country's strategic and economic importance to the other. The importance of India to the United States was underscored in October 2008 with the signing of a bilateral nuclear agreement enabling civil nuclear trade between the two countries.

As major partners, India and the United States engage in a strategic dialogue that includes five principal pillars: strategic cooperation; energy and climate change; education and development; economics, trade and agriculture; and science and technology, health and innovation. In addition, the United States and India have been expanding cooperation in a range of other areas, including through a CEO Forum.

Relations with China

India has extensive land borders with China, strong memories of the short border war with China in 1962, and is conscious of China's role in the region and links with Burma and Pakistan. Despite this, in recent years India has sought to develop friendly and pragmatic relations with China. The two countries have made progress in addressing border disputes, although the issue remains sensitive, particularly in relation to the north-eastern Indian state of Arunachal Pradesh. China is India's largest trading partner, with bilateral merchandise trade totalling US$66 billion in 2013. China was India's largest source of merchandise imports and third-largest destination for merchandise exports (in 2013).

Relations with Pakistan

India's relationship with Pakistan has been problematic since the time of partition at the end of British rule in 1947. Their ongoing territorial dispute over Kashmir, in India's north-west, is a serious obstacle to normal relations between the two neighbours.

Following then Prime Minister Vajpayee's 'hand of friendship' overture to Pakistan in April 2003, both countries normalised diplomatic relations, implemented a ceasefire along the Line of Control (LOC), and re-established some transport links. (The LOC is the military control line between the Indian and Pakistani-controlled parts of the former princely state of Jammu and Kashmir.) In February 2004, the two sides agreed a process for discussions to resolve key issues, called the Composite Dialogue. Both sides have expressed their intention to revive the dialogue. Following this 2004 agreement, there have been several successful bilateral meetings designed to build confidence and make progress on negotiations. Despite the peace process, however, tensions continue in Kashmir.

1.5 track dialogue

A natural extension of the IORA has been the establishment in 2013 of a 1.5 track dialogue between Australia, Indonesia and India as the current IORA troika.

Economic overview

In 2012 India became the third largest economy in the world in terms of purchasing power parity and its economic performance. The Indian economy comprises activity ranging from information technology to subsistence agriculture. After decades of failing to realise its full economic potential, India was one of the world's fastest-growing large economies throughout the early 2000s. Recently, however, growth has slowed and further economic reform is needed.

While selective reform was attempted from as early as 1960, the reform process began in earnest in 1991 due to a balance of payments and foreign currency reserve crisis. This process has focused on liberalising the economy through increased openness to financial and technology transfers, reform of the financial sector, trade liberalisation and reduced government administrative controls. The structure of the economy has changed over the past decade, with services playing an increasingly important role. This demonstrates the difference between India's services-led economic growth and the manufacturing-led development model followed in much of East Asia, including China. However, the Indian Government recognises that India will have to generate stronger manufacturing growth and power generation to sustain economic growth.

Despite recent progress, significant challenges remain, including addressing the fiscal deficit, high inflation rates and government debt, and improving infrastructure and agricultural productivity. Another challenge is to ensure that the benefits of economic growth are experienced more widely. Despite the fact that tens of millions have been lifted out of poverty since the 1990s, average incomes and literacy levels remain low and India is one of the largest recipients of concessional finance from the World Bank (India borrowed $948 million in 2012–13). While still low, India's score in the United Nations Human Development Index (HDI) has increased over recent decades. India's HDI ranking was 136th in 2013. India remains home to around 400 million extreme poor, around a third of the world’s total.

Key economic indicators

India's real GDP grew by 4.4 per cent in 2013. The International Monetary Fund, forecasts GDP growth of 5.4 per cent in 2014 and 6.4 per cent in 2015. Reforms introduced in 2012 to open up key sectors to foreign investment and cut certain subsidies are expected to help boost sentiment in the medium term. Foreign direct investment (FDI) is likely to be a focus of the Modi Government.

Inflation continues to decrease, with the IMF expecting consumer price inflation to reach 8 per cent in 2014 down from  9.5 per cent in 2013. Inflation is expected to decrease to 7.5 per cent in 2015. Inflation is widespread and generalised, with high food prices a key driver.

Key downside risks to the outlook include headwinds from economic and financial weakness in the global economy, a large fiscal deficit crowding out private investment, weak business conditions, a re-emergence of balance of payment pressures that could impact financial stability, and the failure to undertake necessary reforms in the power sector and promote public investment.

Bilateral relationship

Australia has placed India at the forefront of its international partnerships. Both governments recognise there is significant potential for further cooperation across a broad range of areas and in 2009 agreed to categorise the relationship as a strategic partnership.

Australia and India first established diplomatic relations in the pre-Independence period, when the Consulate General of India was first opened as a Trade Office in Sydney in 1941. India's first High Commissioner to Australia arrived in Canberra in 1945. In March 1944, Lieutenant-General Iven Mackay was appointed Australia's first High Commissioner to India.

Strategic partnership

Then Prime Minister Kevin Rudd visited India on 11–13 November 2009. He and former Indian Prime Minister, Dr Manmohan Singh, issued a joint statement that included agreement to upgrade relations between the two countries to the level of a ‘Strategic Partnership’. As part of the Strategic Partnership, Australia and India issued a Joint Declaration on Security Cooperation that sought to intensify their efforts to maintain peace, stability and prosperity and put in place mechanisms to ensure closer and more regular collaboration in security areas. Mr Rudd unveiled a major increase in the diplomatic resources Australia devotes to the India relationship, including new positions in Delhi, new DFAT positions in Mumbai and Chennai, and new Austrade offices across Indian regional cities. Mr Rudd also announced a boost in funding over five years for joint science and technology research projects. This included $65 million that was matched by India for the Australia-India Strategic Research Fund to support joint research in some of the challenges facing the two countries, like energy, food and water security, and $20 million for the Australian Centre for International Agricultural Research (ACIAR) to undertake joint research in dry-land agriculture with India. The Australian Government also provided $1 million to support a joint solar cooling and mini-grids project being undertaken by India's The Energy and Resources Institute (TERI) and Australia's Commonwealth Scientific and Industrial Research Organisation (CSIRO).

Then Prime Minister Julia Gillard made a state visit to India from 15–17 October 2012. Ms Gillard and former Indian Prime Minister Singh welcomed the progress that had been achieved and reaffirmed their commitment to the Strategic Partnership. The two Prime Ministers agreed to hold annual meetings, either bilaterally or in the margins of international summits, and announced deeper bilateral co-operation across a range of issues.

Official visits

Prime Minister Abbott visited India in September 2014, the first foreign leader to conduct a state visit to India since the election of the Modi Government.  Mr Abbott met with Prime Minister Modi, President Mukherjee, Indian Government ministers, and Indian business representatives. During the visit Australia and India signed a civil Nuclear Cooperation Agreement, as well as a number of memoranda of understanding. Prime Minister Abbott announced further Australian support for the Australia-India Strategic Research Fund ($20 million over four years), and announced the roll-out of the New Colombo Plan in India from 2015. The Prime Minister highlighted the potential for increased economic engagement between Australia and India and travelled with an Australian CEO delegation.  Trade and Investment Minister Robb accompanied the Prime Minister.

Foreign Minister Bishop visited India in November 2013. Then Indian Minister for External Affairs Salman Khurshid visited Australia in October 2013 for the Indian Ocean Rim Association Council Of Ministers Meeting.

Australian and Indian Foreign Ministers meet annually for the Foreign Ministers' Framework Dialogue (FMFD) alternatively in Australia and India. The last meeting took place in Perth in October 2013 during Mr Khurshid’s visit. Similarly, Australian and Indian Trade Ministers meet annually for the Joint Ministerial Commission (JMC) and Education Ministers meet for the India–Australia Ministerial Dialogue on Education Cooperation.

In June 2013 Australia hosted the then Indian Defence Minister Arackaparambil Kurien Antony, the first bilateral visit of an Indian Defence Minister. At the meeting the ministers agreed to continue bilateral Naval exchanges to build confidence and familiarity and to work towards a bilateral maritime exercise in 2015.

Prime Minister Abbott and then Prime Minister Singh held the annual Leader’s Meeting in Brunei on 10 October 2013.

Treaties and Memoranda of Understanding

Cooperation between India and Australia spans a range of areas. Notable areas of cooperation include Treaties and Memoranda of Understanding (MoUs) on Air Services; Civil Space Science, Technology and Education; Combating International Terrorism; Customs; Defence Cooperation; Extradition and Mutual Legal Assistance in Criminal Matters; Intellectual Property; Nuclear Cooperation; Skills Training Cooperation; Student Mobility and Welfare; Water Resource Management; and Wool and Woollen Products.

Energy and minerals

A central element of India's foreign affairs agenda is driven by its energy security agenda, which relates to the need to secure energy supplies to meet rapidly growing industrial and consumer demand. Australia is well positioned to partner with India in this regard, through exports of minerals and fuels, energy investment opportunities in Australia and collaboration on areas of joint interest, such as new mining technologies. The Joint Working Group on Energy and Minerals was established in 1999. Regular meetings have generated several initiatives designed to deepen the bilateral energy and resources relationship.

During the visit of then Minister for Resources, Energy and Tourism Martin Ferguson in November 2008, five Action Plans were signed with the Indian ministries of Coal, Mines, New and Renewable Energy, Petroleum and Natural Gas, and Power. The Action Plans underpin our bilateral engagement and technical cooperation on minerals and energy, including trade and investment facilitation. They were updated in May 2011, when Australia and India also launched an annual Ministerial-level Australia-India Energy Security Dialogue. This dialogue was held in Brisbane on 31 March 2014.The Australian Government is putting in place arrangements that would enable the export of uranium to India. During Prime Minister Abbott’s visit to India in September 2014, Australia and India signed a civil Nuclear Cooperation agreement.

Australia and India also announced a Water Technology Partnership to promote closer collaboration on the common challenge of managing scarce water resources. The Partnership includes the sharing of advanced Australian modelling work on river basin flows.

Education

Education is an area of increasing importance to the bilateral relationship. Australia is a major destination for Indian students studying abroad, who recognise the high quality and cost competitiveness of Australian education services. There were more than 36,000 Indian students studying in Australia in 2013: India was the second-largest source country for overseas students in Australia, after China.

Australian Governments at all levels have taken action to ensure the safety of all international students studying in Australia. The Indian Government has expressed acknowledgement and appreciation of the steps Australia has taken in doing so.

Australia and India have also instituted a program of closer cooperation on education matters. Since 2009, education ministers have met annually for the Australia-India Ministerial Dialogue on Education Cooperation. The results of such meetings include the signing in October 2012 of the Memorandum of Understanding on Cooperation on Student Mobility and Welfare to share initiatives that further enhance the international student experience and strengthen the monitoring of education agent activities; and an Australia–India education links website launched by then Minister for Tertiary Education, Skills, Jobs and Workplace Relations Chris Evans and then Indian Minister of Human Resources Development, Kapil Sabil in August 2011. The website acts as a central information portal to support education and training collaboration between Australian and Indian institutions.

The inaugural meeting of the Australia India Education Council was held in New Delhi on 2 August 2011. Under the AIEC, Australia and India agreed to build partnerships between India's Sector Skills Councils and Australia's Industry Skills Councils in key industry areas. Australia also sponsors the Endeavour AIEC Research Fellowships, which supports two fellowships per year (preferably to one Australian and one Indian fellow) for a 4–6 month stay in each other’s country. Information about the AIEC can be found at www.australiaindiaeducation.com.

On 31 July 2011, the first workshop for Vice-Chancellors and Senior University Executives was held in New Delhi, hosted by the University Grants Commission. Eleven vice-chancellors from India and 12 vice-chancellors/deputy vice-chancellors and senior university executives from Australia attended.

To further university collaboration, in 2012 India announced that the Indian Council for Cultural Relations would establish Chairs of Indian Studies in five universities in Australia to promote academic and student exchanges.

Australia–India Council

The Australia–India Council (AIC) was established in 1992 by the Australian Government to broaden the bilateral relationship through increasing levels of knowledge and understanding between the peoples and institutions of Australia and India. The AIC comprises a board of members with interests in the Australia–India relationship, drawn from a cross-section of the Australian community. The AIC is serviced by a secretariat located in the Department of Foreign Affairs and Trade in Canberra. The Australian High Commission in New Delhi manages the AIC's activities in India.

Further information on the Australia–India Council (AIC)

Community presence in Australia

The Australian Bureau of Statistics estimates that over 390,000 people of Indian descent live in Australia (as at the 2011 census).

Economic and trade relationship

The Australia–India economic relationship has grown steadily in recent years. Australia's strength in exporting primary products, particularly minerals and fuels, as well as services like education, positions us well to supply growing Indian industrial and consumer demand.

There are still major barriers to trade with India, despite recent reforms. The IMF has highlighted the importance of continued tariff reduction and the lowering of administrative barriers to trade. Indian tariff rates and trade barriers more generally remain among the highest in the world. In addition to tariffs, India imposes various duties, such as safeguard and anti-dumping duties, and non-tariff restrictions such as import bans and standards or certification agreements.

India has gazetted Australia as a reciprocating territory under its Arbitration and Conciliation Act. As a result, arbitral awards made in Australia are recognised by the Indian legal system.

Two-way goods and services trade totalled $15.2 billion in 2013. Major Australian exports to India in 2013 were coal ($4.8 billion); gold ($1.4 billion); education-related travel ($1.3 billion); and copper ore and concentrates ($1 billion). Major Australian imports from India in 2013 were personal travel services ($677 million); medicaments ($200 million);  passenger motor vehicles ($210 million); and pearls and gems ($197 million).

In 2013 Australia's goods exports to India totalled $9.5billion, or 3.6 per cent of total goods exports, making India our fifth-largest goods export market. Total goods imports equalled $2.4billion in 2013.

Australia exported $1.9 billion in services to India in 2013 primarily comprised of education exports with India the second-largest source of international students studying in Australia. Australia imported $1.4 billion in Indian services in 2013.

The total stock of Australian investment in India totalled $6.5 billion in 2013, with Indian investment in Australia equalling $10.9 billion. Australian investment in India covers a range of sectors, including manufacturing, telecommunications, hotels, minerals processing, food processing, oil and gas, and the automotive sector.

The top Indian software firms – Tata Consultancy Services, Satyam, Infosys, Pentasoft and HCL – are represented in Australia and have a small but growing market presence. There has also been strong Indian interest in investing in Australian resource deposits.

Australia–India Comprehensive Economic Cooperation Agreement (CECA)

On 12 May 2011, then Minister for Trade Craig Emerson and Indian Minister for Commerce and Industry Anand Sharma formally launched negotiations to conclude a Comprehensive Economic Cooperation Agreement (CECA) between Australia and India. The fifth round of negotiations was held in Canberra in May 2013.

Independent modelling conducted in 2008 for a preceding study indicated that an Australia–India CECA could result in a net increase in Australia's GDP by up to US$32 billion (A$45.5 billion) and India's GDP by up to US$34 billion (A$48.3 billion) over a period of 20 years.

When completed, the CECA is expected to be a confidence-building measure that will encourage businesses in both countries to invest in India and Australia, further strengthening Australia’s bilateral relationship with India.

Further information on the CECA

Australia and India are also involved in the Regional Comprehensive Economic Partnership negotiations – an ASEAN centred proposal for a free trade area which would initially include the ten ASEAN member states and those countries which have existing FTAs with ASEAN.

Australia–India Chief Executive Officers' (CEO) Forum

The Australia–India CEO Forum is a mechanism for business from both countries to engage directly on ways to build the bilateral trade and investment relationship. The Forum held its first meeting in New Delhi in March 2012.

The second meeting of the CEO Forum took place in New Delhi on 16 October 2012. It produced a report on practical ways to enhance trade and investment cooperation, including specific proposals in the transport sector, on skills development and infrastructure projects. The Forum also announced the appointment of two Investment Champions, to help prospective investors navigate through our respective systems. The Australian Champion, Ms Kylie Bell, is Austrade's Investment Commissioner for South Asia. (contact: Kylie.Bell@austrade.gov.au) The Indian Champion, Mr Dushyant Thakor, is General Manager of Invest India. (Contact: dushyant.thakor@ficci.com).

The third meeting of the Australia–India CEO Forum took place in Melbourne on 6 December 2013. The participants committed to focus on issues where business-to-business engagement can make a tangible contribution to advancing bilateral economic ties and look to deliver substantive practical outcomes across key areas of common economic interest. The Forum highlighted the importance of investment in generating employment and economic growth and encouraged expedited approval processes, and less red and green tape in both countries.

Further information on investing in Australia, www.investindia.gov.in

Australian trade and investment strategies

Institutional structures for trade promotion

Australia–India Joint Ministerial Commissions (JMC) are held regularly, enabling interaction at a government and business level on a range of issues. There are also joint working groups (JWGs) in specific areas, including Energy and Minerals, Science and Technology, Education and Tourism.

The Australia India Business Council (AIBC) is a key Australian body for promoting business links between Australia and India.

Development Assistance

While Australia does not have a bilateral cooperation program with India, we provide support through our global and regional aid investments and technical assistance activities.